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Ghana Country Report BTI 2008

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Ghana Country Report BTI 2008 BTI 2008 | Ghana Country Report Status Index 1-10 7.30 # 28 of 125 Democracy 1-10 8.10 # 21 of 125 Market Economy 1-10 6.50 # 46 of 125 Management Index 1-10 6.72 # 16 of 125 scale: 1 (lowest) to 10 (highest) score rank trend This report is part of the Bertelsmann Transformation Index (BTI) 2008. The BTI is a global ranking of transition processes in which the state of democracy and market economic systems as well as the quality of political management in 125 transformation and developing countries are evaluated. The BTI is a joint project of the Bertelsmann Stiftung and the Center for Applied Policy Research (C•A•P) at Munich University. More on the BTI at http://www.bertelsmann-transformation-index.de/ Please cite as follows: Bertelsmann Stiftung, BTI 2008 — Ghana Country Report. Gütersloh: Bertelsmann Stiftung, 2007. © 2007 Bertelsmann Stiftung, Gütersloh BTI 2008 | Ghana 2 Key Indicators Population mn. 22.1 HDI 0.53 GDP p.c. $ 2,206 Pop. growth1 % p.a. 2.0 HDI rank of 177 136 Gini Index 40.8 Life expectancy years 57 UN Education Index 0.54 Poverty3 % 78.5 Urban population % 47.8 Gender equality2 - Aid per capita $ 50.9 Sources: UNDP, Human Development Report 2006 | The World Bank, World Development Indicators 2007 | OECD Development Assistance Committee 2006. Footnotes: (1) Average annual growth rate 1990-2005. (2) Gender Empowerment Measure (GEM). (3) Percentage of population living on less than $2 a day. Executive Summary Ghana has enjoyed political stability and economic growth during the period under review. The current government’s persistent efforts to keep the economy on track have been met with continuous support by the donor community. High cacao prices have helped the economy to thrive, allowing the country to tackle important problems, including in particular high rates of inflation and corruption in the administrative system. A new political party, a breakaway from the major opposition group, emerged during the period under review, and the former vice president, Atta-Mills, returned as a presidential candidate for the crucial elections in 2008. While political freedom generally remained high, the government has increasingly reacted irritably to critical reports in the press, and the civil libel law has been exploited to reprimand reporting about individual politicians. Despite this, macroeconomic indicators, by which the donor community judges the performance of Ghana, remained encouraging, with the growth rate above 5% and apparent budgetary stability. Poverty eradication has not been successful enough to satisfy the demands of the increasingly economically minded electorate. Every by-election since 2002, while being peaceful and fair, has handed victory to the main opposition party, reflecting the discontent mood in the population. The beginning of 2007 has not only been the year during which the country celebrates 50 years of independence, but it was also the beginning of official and unofficial campaigning for the elections in 2008. This campaigning will surely dominate the political landscape during the coming two years. BTI 2008 | Ghana 3 History and Characteristics of Transformation Ghana’s first steps toward economic transformation, which could be characterized as a classical “development dictatorship,” preceded political reforms. After independence in 1957, Ghana suffered from several regime changes, most of which could be defined as military dictatorships. The high hopes associated with the father of independence, President Kwame Nkrumah, were trampled by socialist experiments and an increasingly oppressive state apparatus. These circumstances led to Nkrumah’s downfall by a military coup d’etat in 1966. From this point on, aside from the current civilian leadership, there have been only two other periods of civilian rule in Ghana – from the late 1960s to the early 1970s, and from 1979 to 1982. Neither military nor civilian leadership was able to stop the continuous economic decline of one of the world’s biggest cacao producers after prices fell in the 1960s and never again reached the heights of the 1950s. During the period of economic decline, the political situation weakened as well, accompanied by a considerable increase in corruption and rights abuses, and by inept efforts to stem the accelerating downturn in all areas of life. After the second coup d’etat by Jerry Rawlings on New Year’s Eve 1981, a previously unknown era of relative political stability was established, the first “revolutionary” years of the regime notwithstanding. Succumbing to the pressures from both the economic reality and from the international monetary institutions, Ghana’s revolutionary government decided to pursue another traditional structural adjustment program “to the letter” that would curb rising social violence by means of dictatorship. After initiating economic reforms, the Rawlings regime hesitantly bowed to calls for political reform. This was due in part to the growing self-confidence of the political opposition after the end of the Cold War and to the acceleration of the political reform processes in neighboring countries like Benin. The introduction of multiparty politics was accompanied by heavy criticism of Rawlings’ tight control over the process. Unsurprisingly, the first democratic elections of 1992 were characterized by certain irregularities. Nevertheless, despite all fears of another period of dictatorship dressed up in civilian disguise, the next administration proved different. As a civilian president, Rawlings was willing to adhere to constitutional procedures in general and accepted the separation of powers that enabled the establishment of a thriving free press and an independent judiciary. Rawlings was re-elected in 1996, but did not follow the example of other African presidents in changing the constitution to allow him a third term in office after 2000. The New Patriotic Party (NPP), the only non-Nkrumahistic party, had emerged as the only relevant opposition power in the 1990s but played a strange role in the beginning by boycotting the 1992 parliamentary election. However, in 2000, the NPP won the election, marking the first change of government through a democratic election since BTI 2008 | Ghana 4 independence. The defeated candidate, former Vice President Atta Mills of Rawlings’ National Democratic Congress (NDC), conceded defeat and settled with the role as leader of the opposition. The Fourth Republic survived this crucial development with no major problems, and President Kufuor’s new government embraced an accelerated political and economic reform program. It did away with remnants of the dictatorship – especially limits on the freedom of the press – and re-focused its concerns on economic reforms to spur growth after a stagnant period and a major economic setback in 1999. These reforms were continued after Kufuor’s re-election in 2004. The economic reform program first initiated by the Rawlings regime in the 1980s, financed and monitored by the Bretton Woods institutions, was one of the most ambitious and profound programs in African history. Both its negative social side effects, which were controlled by the regime in a decisive manner, as well its positive effects in stopping the slide of the economy and returning Ghana to a period of relatively stable growth, have been an example for others to follow. The program, which included privatization and liberalization, especially of the highly controlled cacao market, was executed with diligence during the period of autocratic rule. However, it was carried out with less enthusiasm after the return to a democratic form of government. There was also a definite period of paralysis during elections, where “gifts” for the voters were needed to muster electoral support. Decisive progress has been made in some areas, particularly with regard to the import/export regime, regulations controlling economic activities, and the establishment of a thriving stock exchange. However, setbacks and problems have persisted. The banking sector has continued to be a problem for years, and inflation has never been under permanent control. This has had adverse effects on exchange rates, the country’s dependence on cacao and, to a lesser extent, gold. Dependency on the export of raw materials has been lessened only by the emergence of a thriving tourism sector. Corruption is still proving to be a problem, however, although it is not as bad as in nearby Nigeria. After an initial burst of activity, the Rawlings administration no longer pursued an aggressive plan for economic reform. The first task of the new government under Kufuor was to put into place a plan for economic reforms, albeit with difficult implications for existing subsidies for water, energy and fuel. BTI 2008 | Ghana 5 Transformation Status I. Democracy During the reporting period, Ghana has been consistent in its endeavors to accelerate economic growth as well as political stability. While on the political front, transformation is less an issue because the institutional framework of the Fourth Republic is well in place and will likely not change considerably for the time being, the upcoming presidential elections and the re-formation of the party system show both the strengths and inherent weaknesses of the democratic experience. This said, democracy in itself is not at stake and therefore smooth and fair elections are expected. Democracy as a philosophy of good governance is increasingly accepted by a majority of people. The only real danger to legitimacy remains the failure of successive
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